Harmonising the Product Line
A group of closely related products constitutes a Product Line. Managing supple product lines involves more than just complementing resources for existing products. Product managers must help maintain a full pipeline of new products and product enhancements. For Product managers managing various product lines and the overall product mix of the company requires resourcefulness and watchful market intelligence. Product management raises complex issues and to solve those issues the product managers need to juggle the product portfolio wisely.
Hindustan Unilever (HUL) the leader of consumer care products juggles its detergent product line. To elude competition for its premium brand ‘Surf’ from brands like Ghari, Sasa, Point etc HUL has down stretched its detergent line downwards with low priced detergents such as Wheel. For many companies, this part of the process is driven internally, while focusing purely on allocating resources, concentrating on ROI, and risk/return. Juggling with product mix needs constant thinking, re-thinking and a lot of market information. Companies need to strategies their product offerings while internally shifting their efforts on product positioning.
One of the many reasons Google consistently brings novel, world-changing products to market is because of their collaborative efforts in Product Management. They are constantly focusing on the future and their team works closely with creative and industrious technicians and engineers to design and develop technologies that improve access to the enormous world information. Google takes the responsibility of guiding its customers right from educating them. Google believes that innovation comes from anywhere; it can come from the top down as well as bottom up, and in the places you least expect. The focus is always on the user. To give another example of how Google keeps inventing – its engineers came up with the idea of driverless cars after seeing that millions of traffic deaths come from human error. Google already had all the building blocks in place to build a self-driving car – Google Maps, Google Earth, and Street View cars. Working with an artificial intelligence team at Stanford University, Google engineers have produced experimental cars that now have travelled to Lake Tahoe and back to the Bay Area and have given the blind more independence by driving them to shop and carry out errands.
Appraisal of each product line is non-stop process in progressive organizations. These organizations are high on market intelligence. A constant monitoring of the product line helps organizations in line stretching, line pruning, line filling, brand/line extensions, brand rejuvenations, brand re-launches, portfolio restructuring, product quality up-gradation, packaging innovation etc.
All said and done, when managing ideas for building an expandable portfolio project and products, it’s difficult to know which opportunities show true promise and which don’t. That’s why it’s imperative that product portfolio management be integral with the tools that product development teams use to collaboratively create products and execute the project plan.
One of the major challenges Indian pharma companies are facing today is of handling diverse product lines; the reason why they are unable to handle flexibility in diverse product lines is that their profit margins do not reflect the constantly increasing investment in drug development. Frost & Sullivan the famous market research company reports that the low returns on investment coupled with various regulatory issues account for the declining focus on research and innovation in the pharmaceutical industry in India.
Since product line involves a collection of related products, sometimes, it may so happen that a particular product line adversely affect the sales of a product in the line, instead of being complimentary to it. HUL controls about 60 per cent of the soaps in the Indian market with brands including Lifebuoy, Lux, Rexona, Breeze, Jai, Moti, Hamam, Liril, Breeze, Dove, and Pears. These brands compete with one another on the shelves creating brand cannibalization. Many of these take thrashing from their sibling brands.
In today’s markets, various products ranged from tires to clothes are becoming increasingly value centered. More and more buyers are turning from status and luxury to lower-cost brands that deliver satisfactory quality and features. To fight this trend or to take advantage of it, firms are offering minor versions of their traditional brand-product package. Firms like HUL, P&G, Dabur, and Godrej everybody is forced to offer differently priced products – so their product lines are filled with products that suits peach pocket in each segment.
Cannibalization starts as soon as the consumer exhibits brand switching behavior or even before that. It starts manifesting itself when the manufacturer asks the retailer to stock the new product. The new product launch gets a priority and is at times stocked even at the expense of other brands. But, companies need to take balanced view on cannibalization while line filling.
Firms like Videocon have done line filling fruitfully to plug certain gaps in a range. The intention of the firm was to be seen as ‘full line’ company and customers find a full basket of the products under one roof. In its product line of room air conditioners Videocon initially had just two or three models. But within two year of entry, Videocon introduced a dozen of models. The offers included three models in split ACs, two models in window ACs with rotary compressor and six models in split ACs with reciprocity compressor. By doing this Videocon rapidly improved its market standing and rose from the position of new entrant to a company offering relatively full line products.
Global marketer P&G feels it is better to get rid of complexities and maintain simpler lines. The company firmly believes that whenever it can apply an existing product formula, or package to a new market, it can save a lot of resources and can also move faster. It is famous that this company in 1990s slashed the number of items to almost half: fewer shapes, fewer sizes and package formulae. P&G had thirty one versions of Head & Shoulder shampoo and fifty two versions of Crest tooth paste. The Head & Shoulder brand was pruned to less than half, to 15 variants. It went ahead and pruned its famous Crest toothpaste brand also substantially.
In Japan, P&G cut the number of Max Factor brand of mascara and foundation items from 1,385 was slashed to 828; the cut took place within just one year, but the sales went up by 6%. P&G also withdrew brands from the market in which it could not be leaders. In the product line of soaps and cleaning materials, it withdrew 11 brands, like Lest Household cleaner and Lava soap. P&G’s pruning exercise is an excellent example of harmonizing the product lines.
Stretching down the line
I want explain this conceptby giving a brilliant example of TTK Group. Sometimes,when a company initially takes its position in the high price-slot segment stretches its product line downwards by offering lower-priced products in the same line for lower markets. For the TTK group, pressure cookers are one of its major product lines their brand ‘Prestige’ is one of the leading pressure cookers in the market. Prestige enjoyed 26% market share in the 1990s. Its major competitor being Hawkins, TTK decided to expand the reach of Prestige to the lower end markets also. The company launched Prestige Popular. It was designed as an economy model and offered to the price sensitive segment. Through this down stretching Prestige increased its market share sizably.
One more example of stretching down the line is of Parker pens. It was operating in the high price slot of the pen market for several decades. To reach the mass market Parker pens decided to down stretch its line by offering low priced models of pens which the masses could afford. This strategy worked wonders for the pen company it has now become a house-hold name.
Stretching up the line
This happenswhen acompany is initially positioned in the lower-end of markets and decides to pull its product line by offering high-priced products for top slots. This is called stretching up. The firm moves up its original posture and makes higher priced offers from its basket. Earlier, Philips was synonymous with low-priced two-in-ones, with its wide offers in the Rs.1, 000-2,000 price range. The company soon found that to become worthwhile player in the market it had to stretch up its line for the richer customers. Philips stretched up the line by bringing its powerhouserange in 1991 which ranged between Rs.6,000 – Rs.9,000. In 1993, Philips also climbed the ladder by offering power play range to cater to the top and middle ends of the market. The Power Play priced from Rs.15,000 – Rs.25,000 Philips doubled its profits by stretching up the line and became a household name for the higher end markets too.
Companies should rationally position and re-position product conflicts within the product line. The marketing strategy of a firm
can place products in a product line in such a way that the products can co-exist, grow, complimenting the streak. A company can add new brands, prune some brands, and rejuvenate some brands by stretching the product line upwards or downwards. A marketing savvy organization can come up with new parallel lines. The results of efficient product lines depend on formulating elastic lines depending on internal and external environment conditions. The parameters of the product line such as the length, width and depth speaks a lot about the firm’s business policy. Just a piece of advice that the leaner the line the better it is to handle in crisis. To conclude, successful organizations are customer-sensitive and flexible to change.